The Enforcement Directorate on Friday conducted searches on one of the Directors of Zanmai Lab Pvt Ltd which owns the popular Crypto-currency exchange WazirX and has issued a freezing order to freeze their bank balances to the tune of ₹64.67 Crore, an official statement by the probe body said.
This comes after Pankaj Chaudhary, Minister of State for Finance, on Wednesday informed the Rajya Sabha on that the probe agency had issued a notice under the FEMA Act to cryptocurrency exchange WazirX prior to this occurrence.
Essentially, WazirX is a Bitcoin and Cryptocurrency exchange that buys, sells and trades in Bitcoin, Ethereum, Ripple, Litecoin and other cryptocurrencies in India.
The ED is conducting a money laundering investigation against several Indian NBFC companies and their fintech partners for engaging in predatory lending practises in violation of RBI guidelines and by using telemarketers who abuse callers‘ personal information and use foul language to extract exorbitant interest rates from borrowers.
Numerous fintech firms supported by Chinese investors were unable to obtain an NBFC licence from the RBI to conduct lending activity. They came up with the MoU method with defunct NBFCs as a result to capitalise on their licencing, the statement said.
In order to conceal its ownership of the cryptocurrency exchange, Zanmai Labs Pvt Ltd, the organisation that owns WazirX Crypto Exchange, has entered into a web of agreements with Crowdfire Inc. in the United States, Binance (Cayman Islands), and Zettai Pte Ltd in Singapore.
Nischal Shetty, the company’s managing director, had earlier claimed that WazirX is an Indian exchange that manages all crypto-crypto and inr-crypto trades and only has an IP and preferential agreement with Binance.
However, as per the probe body Zanmai currently asserts that they only participate in inr-crypto transactions and that Binance handles all other transactions on WazirX. In order to avoid regulation by Indian regulatory agencies, they are providing conflicting and unclear responses.
“Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech app companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also”, it said.
Moreover, WazirX informed that prior to July 2020, they did not even record the details of the Bank Account from which funds were coming into the exchange to purchase crypto assets. No physical address verification was done neither was there any check on the source of funds of their clients, ED said.